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The end of the 2022/23 tax year is fast approaching. If your business has any planned capital expenditure over the next few months, now is the time to consider buying, prior to the end of the current tax year on 5 April 2023.

Super-deduction incentive

On April 1, 2021, the government introduced its 130% super-deduction incentive. This allows companies to claim 130% capital allowances on qualifying plant and machinery investments for expenditure incurred from 1 April 2021 up until the end of March 2023.

‘Plant and machinery investments’ covers any items that are kept to use within a business. These include but are not limited to: cars, building fixtures, and a building’s ‘integral features’, so the potential tax-saving opportunities for businesses looking to expand and develop are considerable.

With March just around the corner, timing of capital expenditure is now crucial for businesses to maximise these tax benefits.

Pension contributions

Making pension contributions pre-year-end can have significant tax benefits. If you are trading as a sole trader or partnership, and suffer higher rates of tax, then additional pension contributions will extend your basic rate band and save 20% tax on the gross value of the contribution.

If operating as a limited company, the contributions made are deductible for corporation tax purposes. Please seek advice from your financial adviser on available allowances for pension contributions.

Capital gains annual exempt amount
Looking to dispose of assets? From 6 April 2023, the annual exempt amount is being reduced from £12,300 to £6,000, then £3,000 from April 2024.

If you have any planned disposals, ensuring completion takes place prior to the end of the tax year on 5 April could save you £1,764 in tax on a residential property sale. This figure is potentially double if the property is jointly owned.

If it’s not possible to complete before 5 Aril 2023, utilising your spouse’s annual exempt amount by way of gifting assets is another option that would yield significant tax savings.

Other tax changes to consider

As well as reductions in the annual exempt amount,
the dividend tax free allowance is set to be reduced to £1,000 and the additional rate threshold to £125,140 as of the start of the 2023 tax year. Corporation tax on profits over £50k will also be taxed at a higher marginal rate of up to 25%.

The takeaway

Planning ahead is the best way to maximise your business’ tax savings before the end of the current tax year on 5 April 2023.

For more information and advice on how to best use any planned capital expenditure within your business, contact CTT Accountancy.